THE ONGOING CORONAVIRUS pandemic has pushed many people to make long-delayed decisions about estate planning. Many people will try the do-it-yourself route via various websites or books. Internet DIY websites make it easy to download forms, but there are mistakes people make when they try do-it-yourself estate planning.
Here are some issues do-it-yourself estate planners might run into:
- You need to know what to ask.
- Sometimes your situation is complicated.
- Estate laws vary from state to state.
You Need to Know Which Questions to Ask
If you are trying to do something simple, such as fill out one specific form, you may be able to do it on your own. “From a simple standpoint (do-it-yourself websites and books) can be very effective for simple things like creating a will,” says Greg Hammer, president of Hammer Financial Group in Schererville, Indiana. “The challenge is sometimes not knowing what to ask.”
If you want a more comprehensive end-of-life plan and aren’t sure about what you need in addition to a will, some professional advice can be helpful. “If you want to cover everything, and are not sure what everything is, that’s where the value of a professional comes in,” Hammer says. A financial advisor or estate planner will be able to explain what you need to include in a comprehensive estate plan.
More Complex Issues Require Professional Help
You may need to take a more holistic look at your estate plan. You should consider estate planning, tax planning and financial planning together because they are all interrelated. If you only look at one of these areas at a time, you may create complications in another area and unintentionally increase your expenses or taxes.
Your situation might also include special issues or circumstances. A do-it-yourself website “might not be able to tell you how to account for a disabled child that might require special circumstances,” Hammer says. “They will give you a blanket list, but it will all be cookie cutter. You won’t have the individual attention to your goals and priorities you get by sitting down and talking to a professional.”
Estate Laws Vary From State to State
Estate planning laws and taxes are different in each state. “Each state can have different rules and legal ways people set things up, including powers of attorney or a health care proxy,” says Jeffrey Corliss, managing director and partner at RDM Financial Group at Hightower in Westport, Connecticut. “Do your research to make sure whatever you use is specific enough to protect you, and make sure it’s applicable to the rules in your jurisdiction.”
There are a variety of different state laws that govern inheritance taxes. There are 17 states plus the District of Columbia that tax your estate, inheritance or both, according to the Tax Foundation. “Some states have them, and some don’t,” Hammer says. “These tax laws can affect planning.” Eleven states plus Washington, D.C. have only an estate tax: Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. Iowa, Kentucky, Nebraska, New Jersey and Pennsylvania have only an inheritance tax. Maryland taxes both inheritances and estates, the only state to do so.
Setting up health care directives and making end-of-life decisions can be tricky. “In my opinion it’s too important to try to do it yourself,” Corliss says. “If it gets screwed up it could affect the ability of your family to take care of financial expenses or manage health care issues. It’s not something I would tend to delegate to a website.”